JPMorgan Agrees to $88M Penalty for Numerous Sanctions Violations

Allegedly Violated Cuban, Iranian, Sudanese and Other Sanctions Regulations

JPMorgan allegedly violated the following regulations between December 15, 2005, and March 1, 2011:

• Cuban Assets Control Regulations (CACR, 31 CFR Part 515);
• Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR, 31 CFR Part 544);
• Executive Order 13382, "Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters;
• Global Terrorism Sanctions Regulations (GTSR, 31 CFR Part 594);
• Iranian Transactions Regulations (ITR, 31 CFR Part 560);
• Sudanese Sanctions Regulations (SSR, 31 CFR Part 538);
• Former Liberian Regime of Charles Taylor Sanctions Regulations (FLRCTSR, 31 CFR Part 593); and
• Reporting, Procedures, and Penalties Regulations (RPPR, 31 CFR Part 501)

Certain Violations Considered Egregious & Reckless Considering Bank’s Sophistication

The settlement covers apparent violations of the CACR, WMDPSR, and RPPR, which the Office of Foreign Assets Control (OFAC) has determined were egregious. OFAC found them to be egregious because the company at issue is a very large, commercially sophisticated financial institution, and its managers and supervisors acted with knowledge of the conduct constituting the apparent violations and recklessly failed to exercise a minimal degree of caution or care with respect to JPMorgan’s U.S. sanctions obligations.

OFAC considers the following violations to be egregious:

Not preventing or disclosing transfers in violation of Cuba regs. JPMorgan processed 1,711 wire transfers totaling approximately $178.5 million between December 12, 2005, and March 31, 2006, involving Cuban persons in apparent violation of the CACR. In November 2005, another U.S. financial institution alerted JPMorgan that it might be processing wire transfers involving a Cuban national through one of its correspondent accounts. After such notification, JPMorgan conducted an investigation into the wire transfers it had processed through the correspondent account. The results of this investigation were reported to JPMorgan management and supervisory personnel, confirming that transfers of funds in which Cuba or a Cuban national had an interest were being made through the correspondent account at the bank. Nevertheless, the bank failed to take adequate steps to prevent further transfers. JPMorgan did not voluntarily self-disclose these apparent violations of the CACR to OFAC. As a result of these apparent violations, considerable economic benefit was conferred to sanctioned persons. The base penalty for this set of apparent violations was $111,215,000.

Slow response on Weapons of Mass Destruction violations. On December 22, 2009, in apparent violation of the WMDPSR, JPMorgan made a trade loan valued at approximately $2.9 million to the bank issuer of a letter of credit in which the underlying transaction involved a vessel that had been identified as blocked pursuant to the WMDPSR due to its affiliation with the Islamic Republic of Iran Shipping Lines (IRISL). Although JPMorgan supervisors and managers determined that this trade loan was likely an apparent violation of the WMDPSR and, in late December 2009, decided to submit a voluntary self-disclosure to OFAC, the bank did not mail its voluntary self-disclosure until March 2010, three days prior to the date on which it received repayment for the loan without OFAC guidance or authorization. JPMorgan also failed to respond promptly and completely to an OFAC administrative subpoena seeking information on this transaction. OFAC determined that JPMorgan made a voluntary self-disclosure of this apparent violation. The base penalty for this apparent violation was $2,941,838.

Not disclosing documents in violation of Reporting Regs. The apparent violation of the RPPR occurred between November 8, 2010, and March 1, 2011. On October 13, 2010, OFAC issued JPMorgan an administrative subpoena pursuant to section 501.602 of the RPPR directing the bank to provide certain specified documents related to a specific wire transfer referencing "Khartoum." In response to this subpoena and a subsequent communication, JPMorgan compliance management failed to produce several responsive documents in its possession, and repeatedly stated that it had no additional responsive documents. OFAC ultimately provided JPMorgan with a list of multiple responsive documents that OFAC had reason to believe were in its possession based on communications with a third-party financial institution. This prompted JPMorgan to correct its prior statements that the bank possessed no additional responsive documents and to produce more than 20 responsive documents. JPMorgan did not voluntarily self-disclose the apparent violation of the RPPR to OFAC. The base penalty for this apparent violation was $250,000.

(See details for alleged violations which OFAC does not consider egregious.)

Penalty Potential Mitigated due to Bank’s Cooperation, History of Compliance

OFAC mitigated the total potential penalty based on JPMorgan's substantial cooperation, including conducting an historical transaction review at OFAC's request and entering into tolling agreements with OFAC, and the fact that OFAC had not issued a Penalty Notice or Finding of Violation against JPMorgan in the five years preceding the transactions at issue. Mitigation was also extended because JPMorgan agreed to settle these apparent violations.